Astronomers have discovered a planet outside our solar system that is potentially habitable with Earth-like temperatures.

The planet is just the right size, it may have water in liquid form and in galactic terms is our neighbour at 120 trillion miles away. The star it closely orbits is known as a "red dwarf" and is much smaller, dimmer and cooler than our sun.

There's still a lot that is unknown about the new planet, which could be deemed inhospitable to life once more is known about it.

Scientists' requirements for habitability are for the planet to be a size relatively similar to Earth's and for it to have temperatures that would permit liquid water. However, this is the first outside our solar system that meets those standards.

"It's a significant step on the way to finding possible life in the universe," said University of Geneva astronomer Michel Mayor, one of 11 European scientists on the team that found the planet. "It's a nice discovery. We still have a lot of questions."

The planet was discovered by the European Southern Observatory's telescope in La Silla, Chile, which has a special instrument that splits light to find wobbles in different wave lengths. Those wobbles can reveal the existence of other worlds.

The discovery of the new planet, named 581c, is sure to fuel studies of planets circling similar dim stars. About 80 percent of the stars near Earth are red dwarfs.